Steps to make college more affordable

One of us is a U.S. Senator who will soon face a crucial decision on keeping college affordable for students in Minnesota and across the country.

The other two are college students who are accumulating college loans to pay for our education, and who know there’s a lot riding on upcoming decisions in Congress.

Although we come from different generations, the three of us share the same belief that investing in a college education is also an investment in our nation’s economic future.

With the recent news that college loan debt now exceeds $1 trillion and has surpassed even what Americans owe on their credit cards, we know that we are sending many of our newly-minted graduates out into the work force awash in crippling debt.

But just as disturbing is the fact that the fast-rising cost of college is making college difficult — if not impossible — to afford for millions of students. This undoubtedly has deep implications for future job growth and for our nation’s ability to compete.

In Minnesota, where we pride ourselves on our education system and on providing students with top-notch post-high-school options, our student debt is staggering. We have the nation’s fourth highest debt load, with the average graduate leaving college with almost $30,000 in college bills.

Is it worth it? Well, students are gambling that it is. And for good reason. In the very near future about 70 percent of all Minnesota jobs will require some kind of post-secondary degree or other credential.

And the jobs that don’t require additional education will pay less — a lot less.

Students aren’t accumulating such large debt loads because they’re lazy — far from it. Last year, when Sen. Franken met with a group of MnSCU students, every hand went up when he asked how many of them work at least 10 hours per week to help afford college.

Some even put in a full 40-hour workweek while attending school.

As more and more students take on debt to get through school, Congress must decide by July 1 whether it will allow the interest rate on subsidized Stafford Loans to double. This year, it is estimated that more than 7 million students will take out these loans, and including some 200,000 Minnesota students will have them.

Without Congressional action, interest rates on future subsidized Stafford Loans will go from 3.4 percent to 6.8 percent, and the average subsidized Stafford loan borrower will face $1,000 in increased loan costs for each year they attend school.

And we know that every dollar spent paying down debt is money that can’t be saved or that is unavailable to buy a home, a car or other purchases that ripple through our economy.

And many graduates report delaying major life decisions in order to make monthly student loans payments.

We all know that our nation’s economic future is tied to making college more affordable, and we know some of the steps we need to take to get there.

Steps to Take

First, we need to freeze future subsidized Stafford loan interest rates at current levels and prevent them from doubling in July. There continues to be debate on how best to pay for this, but our presidential candidates as well as our Congressional leaders have all said they want to get it done.

Second, we need a universal financial aid form that would allow students to easily compare financial aid packages from different schools. Currently, students must decipher a complicated system of grants, loans, and work study funds, and often don’t understand what they’re eligible for. A universal form would give families the ability to compare financial aid packages and to know exactly what college will cost.

Third, we need to take steps to actually reduce the cost of college so that students don’t have to take on such massive debt loads.

There are no easy answers, but it is the responsibility of universities, state legislators, Congress and other federal officials, as well as community stakeholders to come together and develop solutions to address this pressing problem.

At a recent University of Minnesota event on college affordability, one student remarked: “The question is always: ‘How are we going to make it?’”

Getting your degree shouldn’t make you go bankrupt. And we all hope that in the months to come, we see some serious action to fix what has become a major problem for American families and for our nation’s future.

— Al Franken, the primary author of this column, is a United States Senator from Minnesota.

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Raising the amount of money the federal government ‘gives’ students for college tuition will actually RAISE the cost of education not decrease it. There is a 90/10 rule set in place by the federal government that pushes tuition up each time it’s own grants are increased! Yes, increasing the grant increases the amount the federal government pays but the percentage of student debt remains the same percentage of their education and when that education cost increases so does their debt!

The so-called “90-10 rule,” which dates back to Congressional action in 1992, requires that students at private-sector colleges pay at least 10 percent of their education costs from sources other than federal student aid provided through the Higher Education Act.

Supporters of the 90-10 rule argue wrongly that this financial requirement serves as an indicator of educational quality. In fact, the 90-10 rule creates perverse and unintended incentives that discourage colleges from serving low-income students who benefit most from higher education.

Advocates of the 90-10 rule claim that students should be willing to pay 10 percent of the cost out of their own pockets if a school is worth the tuition. This assumption ignores a basic fact of economic life: low-income students can’t meet this requirement because they just don’t have the money.

The federal government wisely created Pell Grants and other aid programs for low-income students because they can’t attend college any other way. Over the past four years, federal student aid has been increased by more than 40 percent because increasing costs have made it harder than ever for students to afford college. The misguided rationale behind the 90-10 rule
runs directly counter to the sound public policy behind these student aid programs.

The conflict between these two contradictory policies creates a “Catch 22” that makes it impossible for some of the most cost-effective educational programs that serve low-income students to comply with the 90-10 standard.

Currently, very low-income students are entitled to as much as $15,000 in federal financial aid during their first year of study ($5,500 in Pell Grant funds, $3,500 in Stafford subsidized student loans and $6,000 in Stafford unsubsidized student loans). Corinthian Colleges offers a number of career education programs that last one year or less, lead directly to professional diplomas or certificates and cost around $15,000. Corinthian is required to offer students the maximum amount of federal financial aid to which they are entitled; therefore, complying with that law makes it impossible to observe the 90-10 standard.

This leaves Corinthian’s campuses – and our students – facing two completely unacceptable alternatives. Either our schools can stop serving those low-income students who benefit most from the career education programs we offer. Or we can raise the price of those programs, forcing our students to pay 10 percent of tuition.

Because of the 90-10 rule, Corinthian Colleges will be forced in early 2011 to impose a tuition increase that we do not want to charge. In a quarterly conference call with shareholders on February 1, 2011, Jack Massamino, Chairman and Chief Executive Officer of Corinthian Colleges said, “Suffice it to say that we are in the unfortunate position of having to take substantial tuition increases in order to remain in compliance with the 90-10 rule. If the 90-10 rule is modified in a favorable manner, we will reduce pricing to reflect that benefit on a prospective basis.”